China: Smaller trade surplus with US is OK

But negotiators draw line at changing technology tactics

Joe McDonald

BEIJING — Narrow our trade surplus with the United States? No problem, say Chinese negotiators. But change technology tactics that are China’s path to prosperity and its rightful place as a global leader? Absolutely not.

China highlighted the sensitivity of the issue with its threat Sunday to scrap deals aimed at settling a trade dispute with Washington if President Donald Trump’s tariff hike on $50 billion of Chinese technology goods goes ahead.

It sheds more light on where President Xi Jinping’s government might compromise and where it rejects any challenge to a Communist Party-led model for technology development that it sees as hugely successful.

“Where China does not budge is in areas it considers to be its fundamental development strategy,” said Louis Kuijs of Oxford Economics, a former World Bank economist in Beijing. “If the U.S. is asking China to stop these industrial policies to become a global technology leader, that is where China says, ‘Look, that’s not possible.'”

The desultory end to weekend talks led by Commerce Secretary Wilbur Ross and China’s top economic official, Vice Premier Liu He, revived worries Beijing and Washington are sliding again toward open conflict.

The dispute is in two largely unrelated halves: American frustration with China’s overall trade surplus with the United States — a record $375.2 billion last year and forecast to grow — and more narrowly focused complaints about Beijing’s technology policy.

China already agreed to address the first with a May 19 pledge to buy more American farm goods, energy supplies and other products.

That is fairly easy, said private sector analysts. Beijing can buy more U.S. natural gas and soybeans and less from Russia and Brazil. Its overall trade balance would stay the same.

Technology is thornier. It strikes at the heart of plans the ruling Communist Party sees as critical to reducing poverty that remains widespread despite two decades of explosive economic growth.

The United States and other governments complain that Chinese technology industries are built on know-how Beijing steals or pressures foreign companies to hand over.

Before Beijing joined the World Trade Organization in 2001, such “technology transfer” often was an explicit requirement for foreign companies that wanted access to China’s state-dominated economy.